Veitch Penny Solicitors

Businesses often feel under commercial pressure to grant credit to important clients but one High Court case showed how easy it is for such debts to get out of control. A commodities trading company had agreed to defer payment of part of a favoured customer’s bills but ended up being owed almost $5.3 million.

The company regularly supplied large volumes of gasoil and gasoline to the Albanian client. To assist with the client’s expansion plans, the company was persuaded to accept 50 per cent payment in advance of delivery and 50 per cent within 90 days thereafter. The client took extensive advantage of that deferred payment scheme and, given the high value of the goods involved, a substantial debt swiftly developed.

When pressed for payment, the client repeatedly apologised for the delay. There were negotiations as to the balance due but the majority of the money was never forthcoming. The company eventually issued debt recovery proceedings. After putting in a defence to the claim, the client had played no further part in the case and had failed to respond to any correspondence. In those circumstances, the Court found the amount of the debt proved and entered judgment against the client for a total of $5,296,232, including interest.